Freed From Extreme Poverty, but Left Out of the Middle Class

Tajikistan is one of the few countries in the world that made the leap from tktkt. PETTERI KOKKONEN/UNDP
Tajikistan made the greatest leap worldwide in decreasing its poverty rate from 2001 to 2011, says a new report. Here, an apricot farmer using drying equipment to increase his volume. PETTERI KOKKONEN/UNDP

When the final assessment of what the Millennium Development Goals achieved was released on July 6, the United Nations said confidently that more than 1 billion people had been lifted from poverty since 1990, the baseline year for setting the goals, which were then monitored from 2000 to 2015. But where did these poor people go? They did not, apparently, rise to a middle class or middle-income status in their respective countries. Most moved up marginally into a still precarious low-income level, a new independent report said.

In the study, “The Global Middle Class Is More Promise Than Reality,” the Pew Research Center concluded that at the end of the decade from 2001 to 2011 — the first decade of the MDGs in action — 56 percent of the world’s population continued to live low-income lives “only barely” out of poverty. Only 13 percent of the world population could be considered middle income by a global standard of $10 to $20 a day, according to Pew researchers. The world’s poor live on $2 a day or less; low income is considered to fall between $2 and $10.

Moreover, while acknowledging that the world’s middle-income population had grown from 2001 to 2011 — when all segments of the population grew to one extent or another as the world crossed the 7 billion mark — that growth was very uneven. “[T]he rise in prosperity was concentrated in certain regions of the globe, namely China, South America and Eastern Europe,” the report said. “The middle class barely expanded in India and Southeast Asia, Africa, and Central America.”

Pew researchers studied 111 countries comprising 88 percent of the global population. They used 2011 prices in dollar figures converted to purchasing power parity dollars, a scale adjusted for countries’ differences in prices of goods and services or levels of consumption. Ways of calculating or measuring income levels often vary from country to country.

The report showed a sharp contrast between China and India, the world’s two most-populous countries, though both were major contributors to the drop in numbers of extremely poor people.

In a few cases, most prominently China, poverty’s retreat was accompanied by significant gains in the share of middle-income earners, according to the Pew research. “The poverty rate in India fell from 35% in 2001 to 20% in 2011. That meant that 133 million Indians exited poverty in that decade, the second-largest drop globally after China. However, the drop in poverty merely resulted in an increase of 273 million in the low-income population, whose share rose from 63% in 2001 to 77% in 2011.”

“The middle-income population in India barely budged during the decade,” the report said. “Its share increased from 1% in 2001 to 3% in 2011, still small by any measure. The number of middle-income people grew by 17 million, paltry compared with the increase in the low-income population. From these trends, the middle-income threshold appears more like a barrier as only a small share in India stepped across the line from 2001 to 2011. It is clear from these estimates that India did not keep pace with China in creating a middle class in this century.”

The survey revealed some counterintuitive situations that would interest numerous global actors, including corporations and investors who are looking for emerging economies with growing numbers of middle-class consumers. Among the findings in the report, which includes extensive reference material, tables and charts, are these:

  • While the doubling of the global middle class, from 7% in 2001 to 13% in 2011, is certainly a major shift with potentially major economic and political ramifications, it is important to keep in mind that at the end of the first decade of the 21st century, the vast majority of the world’s population (71%) remained either poor or low income.
  • The greatest decrease in the poverty rate was in Tajikistan, where the poverty rate plunged 45 percentage points, from 72% in 2001 to 27% in 2011. Kazakhstan nearly eliminated poverty in the 2000s: its poverty rate fell from 18% in 2001 to less than 0.5% in 2011. Likewise, several other countries with poverty rates near 20% or higher in 2001 virtually extinguished poverty by 2011. Countries with this distinction include Bhutan and Moldova.
  • Among the 26 countries in which the poverty rate fell by at least 15 percentage points from 2001 to 2011, only Bhutan, Moldova, China, Ecuador, Argentina and Kazakhstan experienced double-digit gains in the share of their middle-income populations.
  • [China’s] middle-income population . . . jumped from 32 million in 2001 to 235 million in 2011, an increase of 203 million. The share of the middle-income population rose from 3% to 18%, a sixfold increase in the span of a single decade.
  • There is a distinct regional pattern to the distribution of people by income. Vast majorities of people in Africa and Asia and the South Pacific are either poor or low income. In sharp contrast, most people in North America and Europe are either upper-middle income or high income. The standards of living in South America and Central America and the Caribbean fall in between.
  • [In Eastern Europe] The most notable increase in the middle-income population is in Ukraine, where the share of this group jumped from 8% in 2001 to 49% in 2011. Among others, noteworthy gains also occurred in Belarus (from 21% to 53%), Moldova (3% to 26%), Bulgaria (28% to 48%) and Romania (6% to 25%).

The Pew report does not attempt to analyze in social terms why certain countries or regions continued to be mired in poverty. The survey steers clear of issues like demography and fertility rates, for example, although most advocates of development and women’s rights know that in some areas of Africa and Asia, unabated population growth strains large families and communities that are barely managing on subsistence resources. Marginalized ethnic or other minority groups and low-caste people in India and elsewhere in Asia face huge barriers that keep them from increasing their share of economic growth, even as others in the same societies advance.

Joseph Chamie, a former head of the United Nations Population Division, is a demographer who has always stressed the social or human connections to population statistics. He said in an interview with PassBlue that he was wary of attempts to define a global middle class for several reasons, especially using economic indicators.


 

 

“Cross-national comparisons are difficult, often involving fuzzy thinking, because many economic measures are not truly comparable globally,” he said. “For example, being middle class or poor varies greatly across countries such as Bangladesh, Brazil, Burundi and Britain. In contrast, demographic measures such as infant mortality, life expectancy and fertility are comparable across nations and hence international comparisons are possible and meaningful.

“Little, if any, mention is made of population and demographics [in the Pew survey],” he said. The words “mortality” and “fertility,” for example, do not appear in the report. Also, no mention is made of the 790 million additional people who were added to world population during the 10-year period.

Fundamentally, Chamie added, “An internationally recognized definition of middle class doesn’t exist. Consequently, considerable caution is advised when making statements or conclusions about global levels and trends of the middle class that are based largely on income.”

 

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